Dan Garodnick Q&A: The Senate Bill That Would Bail Out Landlords and Gut Court Ruling on Stuy Town Rents

May 4, 2011

In 2009, a landmark state appeals court ruling found that the owners of Stuyvesant Town-Peter Cooper Village had illegally deregulated 4,400 apartments while enjoying special tax breaks from the city. Its impact wasn’t quite clear; no one was sure what the legal rents of those apartments should be or how much the wronged tenants should receive in rebates.

Tenant advocates and Dan Garodnick, the councilman who represents Stuy Town, hotly oppose the bill. Garodnick — who was also born and raised and still lives there — gives Runnin’ Scared his take.

The new law would allow the landlords to pay the taxes that they had avoided, while the apartments that were improperly deregulated into market rate units would stay that way. Here’s our (edited) conversation with Garodnick:

Does the bill affect only Stuy Town?

There are about 40,000 units in New York City that were removed from rent stabilization by building owners who were who were receiving a tax break from the city — known as J-51. Basically, it’s a tax break for landlords who are doing improvements on their buildings, but while you are getting it, you need to keep the units rent-stabilized.

And the court case found that developer Tishman Speyer had been using the tax break illegally.

The Roberts vs. Tishman Speyer case established that landlords that were getting the tax break could not, at the same time, remove units from rent stabilization. That was always the legislature’s stated intent and that continues to be the law today. But building owners continue to violate it.

Even after the ruling?

Yes, there are people who are part of J-51 buildings who continue to pay market rent, not realizing they are covered by this lawsuit.

How do you know?

We know there are buildings out there, but not all people know they have additional rights as a result of this lawsuit.

Tell us about this new bill.

The bill that’s pending in Albany would eviscerate the court ruling. It would allow landlords to return their tax breaks and opt out of the J-51 program. That, unfortunately, would deprive tenants of their rights . . .

To live in a rent-regulated apt?

Yes, and it would also deprive them of their right to rebates for rent overpayments and also to have their rent adjusted to the legal level. And, if the landlords do not opt of J-51, the bill gives landlords the right to set the rent at 2005 levels, which was the height of real estate market in the city.

The president of the Real Estate Board of New York, Steven Spinola, told the Times that the bill would generate hundreds of millions of dollars in revenue for the city. Spinola says: “It would allow people to people to pay back the tax benefits, and free them from back rent claims and the requirement to go back to rent regulation.” How do you respond to that? I’m sure that you feel landlords who broke the law should be paying back rent claims.

It would certainly generate a windfall for the building owners who circumvented the law for all of those years and deny tenants who were overcharged their right to any recovery.

What would this mean for you and your neighbors in Stuy Town? You see this as a total reversal of the lawsuit you won?

The 4,400 units that were deregulated would go to the market, and the current and former occupants would lose their right to recovery for the harm they were caused. It is a total reversal, without any questions. And it would do more than just roll back a court decision It would threaten the long-term affordability of these units.

But why shouldn’t landlords who want to deregulate apartments be able to out of the tax benefit?

It’s one thing to change the law, but the current law says you cannot opt of the program if you are in it. Today they are in it. This was their decision. They wanted to take a tax break for building renovations. And once they decided they wanted to participate, it came with a term of years and a requirement that they keep the units rent-stabilized.

So basically, if they hadn’t gotten the tax break, they could have just freely deregulated all of Stuy Town?

If they had followed basic rent guidelines for deregulation.

Right, with incremental increases, but J-51 allowed them to deregulate all at once. So what you’re really saying is, “Why should they have the privilege of turning back the clock?”

But that’s not what being proposed. What’s being proposed is to allow them to pay the taxes and keep their apartments at market level today. And that’s not fair. It doesn’t address the thousands of individuals who are harmed, it ignores the law, and it ignores the fact that we’ve lost thousands of otherwise affordable units.